Technology: Rent or Buy?

Sunday, 09 August 2015 17:02
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Greetings!

As with individuals making housing decisions regarding whether to rent or build/buy, corporations now must decide whether to invest in internal technology development or pursue external technology licensing or acquisition instead. Decisions, decisions...

Curious to learn more? Read on, dear friends...

Technology: Rent or Buy?

Many large consumer products companies have historically done much of their own technology development. Procter and Gamble for example, has a long history of internally developing its own technologies and leveraging these across brands to maximize their often considerable R&D investments. For instance, decades ago, they would develop a high performing laundry detergent chassis and then apply it across brands, differentiating formulas via performance and aesthetic ingredients such as builders, enzymes, fragrances and dyes. This can be a highly efficient formulation approach versus developing each one independently and totally from scratch. Today, P&G might choose to license or acquire an external technology to support its product development work.

These days, companies are challenged to decide whether or not to invest resources in conducting internal technology development. They may choose to make near-term product planning decisions, including accessing mature technologies developed by external partners versus building their own. This can be a positive thing, of course. It can reduce development risks and costs and potentially shorten product development cycles. However, it can also cause them to treat technology acquisition as a short term, ad hoc transaction, rather than as a strategic investment. Further, it can also require them to make and accept certain tradeoffs versus custom development.

When securing the rights to a particular technology for a specific need or product, a company should consider whether the technology is expected to have a long life, or if they anticipate that it will be eclipsed by an emerging platform. This is an especially relevant consideration within categories where technologies and product categories are rapidly evolving, such as with digital devices.

Companies should approach their technology sourcing decisions strategically, and make "rent or own" decisions after considering both short and longer term implications. These scenarios have become more complicated than they were even a few short years ago.

"Connecting You With The Right Solutions" BFS Innovations, Inc.

Since 2005, BFS Innovations has helped its Fortune 500 clients with technology scouting, new business creation and development services. Contact Michael today at This email address is being protected from spambots. You need JavaScript enabled to view it. or at 614 937-2408 to discuss your company's needs.


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